The problem posed by social inflation is "finally coming into focus" across the insurance industry, according to W. R. Berkley Corp.'s top executive.
"People are beginning to realize that it is real and it is here," President and CEO W. Robert Berkley Jr. said during a third-quarter earnings conference call.
Social inflation refers to the increase in losses caused by legislative, judicial and social changes including higher jury awards, changes in how claims are handled by workers' compensation boards and evolving tort environments, among other things. Berkley said higher levels of severity are especially being seen in the casualty segment.
Earlier in the day, Travelers Cos. Inc. Chairman and CEO Alan Schnitzer said his company's general liability and commercial auto lines were hit by a worse-than-expected tort environment due to "higher and more aggressive level of attorney involvement in claims." Schnitzer said tort reform was already a public policy focus for Travelers but that the company is "stepping up [their] efforts."
Berkley argued his company is better positioned than its rivals to deal with the challenges as it has kept an eye on the phenomenon over the last few years and addressed it through pricing, selection, terms and conditions and attachment points. However, he admitted W. R. Berkley is not "completely insulated" from the effects of social inflation.
The nature of W. R. Berkley's portfolio tends to focus on smaller business trends, naturally driving the company away from some headline losses.
"We think that we'll be disproportionately less impacted relative to many of our peers because of the type of business that we operate and our approach to running the business," he said.
The shift in the marketplace provides an opportunity for specialty lines, as well as the excess and surplus sector, which is a significant part of W. R. Berkley's business, according to the CEO.